Boston Condos for Sale and Apartments for Rent
Question about Boston real estate prices
Hers’s the question: How does Boston condo buyers budgets impact the Boston condo for sale market?
Lets’ look at the data
Homebuyer budgets remain flat from last year, rising just 0.3% in the three months ended April 30, according to a new Redfin report, which noted it as the slowest growth rate since June 2020.
Redfin based its analysis on the average maximum budget set by those using its online services and says those declines are a leading indicator that home-price growth has passed its peak and will begin to slow.
And that’s not all.
The company also says the decline is a sign high mortgage rates are having a big impact on how much money buyers can spend, as more of their budgets are going toward interest payments.
“When mortgage rates go up, buyers’ budgets go down,” said Redfin deputy chief economist Taylor Marr. “And when buyers’ budgets go down, sellers have to meet buyers where they are. Budgets haven’t fallen from a year ago and we don’t expect home-sale prices to fall, either. But the fact that budget growth has slowed so significantly is one sign among many that home-price growth will continue to slow as the year goes on.”
The report found budgets hit their peak growth last April at 12.2%, three months before home sale prices hit their peak, increasing 22.6% year over year last July.
Redfin economists say they expect the cooldown in budgets to lead to a cooldown in price growth over the next few months.
While buyers are taking things more slowly, sellers aren’t as quick to adjust, but they are starting to react, with 21% of sellers dropping asking prices in the last four weeks – up from 10% last year.
The slowdown in homebuyer budget growth began in January. According to Redfin, budgets increased 5.1% year over year in December and declined every month since then, coinciding with rising mortgage rates. For most of last year, mortgage rates were around 3% and are now at 5.2%, as they have continued to grow since January.
The slowing of prices is good for buyers, but they still have to deal with rising mortgage rates.
Boston condos for sale and the Bottom Line
Buyers are qualified to borrow less money because of rising rates, which means they’re searching for less-expensive Boston condos for sale. There’s still limited supply and a surplus of buyers, but buyers are pickier now, and their budgets are more limited.
Updated: Boston Real Estate Blog 2022
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Last week, a very well-respected real estate analytics firm surprised many with their home price projection for the next twelve months. CoreLogic, in their latest Home Price Index said:
“The economic downturn that started in March 2020 is predicted to cause a 6.6% drop in the HPI by May 2021, which would be the first decrease in annual home prices in over 9 years.”
The forecast was surprising as it was strikingly different than any other projection by major analysts. Six of the other eight forecasts call for appreciation, and the two who project depreciation indicate it will be one percent or less.
Here is a graph showing all of the projections: There’s a simple formula to determine the future price of any item: calculate the supply of that item in ratio to the demand for that item. In the Boston real estate market right now, demand far exceeds supply. Last week mortgage applications to buy a home were 33% higher than they were at the same time last year. The available inventory of homes for sale is 31% lower than it was last year. Normally, these numbers should call for homes to continue to appreciate.
Boston Real Estate and the Bottom Line
Because of the uncertainty with the pandemic, any economic prediction is extremely difficult. However, looking at the limited supply of homes for sale and the tremendous demand for housing, it is difficult to disagree with the majority of analysts who are calling for price appreciation.